All non-essential businesses in Pennsylvania were ordered to close their physical locations by 8:00p.m. on Thursday, March 19th. Questions immediately arose as to what constitutes an essential business. The list of businesses was set up using strange names for some types of businesses. Updated Business Guidance For example, in the financial industry, who would know from the listed category “Credit Intermediation” what that word means.
The Governor’s list uses the Federal Government’s NAICS (North American Industry Classification System) code names to identify the classes of businesses on the list. Every business uses its specific class code within a general subsector of the economy and industry group on its Federal tax returns. Subsector Code 522 is “Credit Intermediation” includes within it Industry Group 52231, “Mortgage and Non-Mortgage Loan Brokers”. So, if a mortgage brokerage confirms its industry code on its tax return, it should be able to stay open under the Governor’s Order, as last updated 5:41 pm on Saturday, March 21st. The link above should take you to the most recent update, if the list changes again. Since Thursday, March 19th, the list has been updated at least twice, and is likely to be updated again.
The current list has substantial internal inconsistencies, which affect real estate investors and those who serve them. For example, while the mortgage broker and bank can remain open as essential businesses, title agencies under class 541191, like my title agency, are required to close our physical offices. Even more concerning, Lessors of Real Estate, under Industry Group 5311, and property managers under Industry 53131 are also to close physical offices. The Governor’s office has tried to answer more questions on its FAQ link FAQ on Business Guidance, but that is not too helpful yet.
Because of the confusion in terminology and inconsistency, many businesses have filed applications for waiver of the closure requirement. Business Waiver Application Form The number of waiver applications overwhelmed the staff at the Department of Community and Economic Development, and led the Governor to delay his closure order until Monday, March 23rd at 8:00 a.m.
Acre’s state organization, the Pennsylvania Residential Owners’ Association (PROA) is working through our lobbyists and coordinating with other groups to provide waiver or exception for leasing of vacant residential units to persons who need housing. A preliminary call by a landlord representative with someone in the Governor’s office on Friday was promising, but the revised Guidance Saturday evening did not yet reflect any clarification on this issue. (By contrast, notes on what lawyers may and may not do have changed twice since Thursday).
The Pa Land Title Association has developed a protocol for conducting real estate closings using CDC guidelines, and is requesting , but has not yet received a waiver for any such services. letter seeking a waiver That is a current barrier to conducting closings in PA, because we don’t yet have a remote online notarization statute as many other states do. The PA Senate previously passed and is now reconsidering a 2017 bill (then SB 595) to allow Remote Online Notarization. https://www.legis.state.pa.us/cfdocs/legis/PN/Public/btCheck.cfm?txtType=PDF&sessYr=2017&sessInd=0&billBody=S&billTyp=B&billNbr=0595&pn=1654
E-mail or call your state Representative and Senator to get this bill passed soon.
I am an agent for Fidelity National Title Insurance Company, which has authorized us to close transactions up to $1,000,000.00 by Remote Online Notarization (RON) without additional exception to the title policy as soon as the state statute is effective, our RON software is in place, and the county where the property is located will accept electronic documents with electronic signatures and notarization for recording. If the Lender does not use eNotes, our closing instructions must confirm that the lender will be responsible for obtaining the borrower’s wet ink signature on the note. Further, if we close remotely before PA’s RON law is effective, we must insert the following exception in any policy issued: Any defect, lien, encumbrance, adverse claim, or other matter arising out of the use of remote online notarization.
Lenders are not likely to accept that exception on a title policy, but cash buyers might, after appropriate discussion and advice. One lawyer in my office is already approved to notarize online as soon as the procedures are in place, and the rest of us are in the process of that approval. We are testing RON software approved by our underwriter to provide that service but need the statute to be passed to truly be able to close transactions with RON. All other settlement companies in PA have the same limitations, and likely many are working toward providing these services when we can. I will provide further updates through Acre.
One important note in paragraph 9 of the FAQ section of the Governor’s Guidance applies to many otherwise closed office locations:
Many businesses, that are required to suspend physical operations, maintain limited in-person essential personnel for security, processing of essential functions, or to maintain compliance with federal, state or local regulatory requirements?
Businesses suspending physical operations must limit on-site personnel to maintain critical functions, and in all cases follow social distancing and COVID-19 mitigation guidance provided by the PA Department of Health and CDC.
For my own office, that means we are getting mail, maintaining computer and phone systems, and entering and exiting our building at staggered times to retrieve paper files we need to continue providing services to our legal and closing clients. Our lawyers and staff are working remotely, and have our VOIP phones at home, all the software and links to our office computers, and even remote dictation and transcription of letters and other documents in place. You should take all the same steps you can for your business to function as well as it can during these uncertain times.
We are also working to be able to provide in-person notary services with six feet of separation, following other CDC guidelines on essential documents like wills, powers of attorney and healthcare declarations, which a number of our clients have asked us to update during this time. We are drafting documents remotely and working on how to notarize until the Pennsylvania RON statute is enacted. Our current plan is to do so from vehicles in a parking lot, but I want to get input from doctors on the details of that practice before we do so.
Keep in mind that you should also make sure your business succession plan for your LLC or LP is in place in the event you are unable to conduct your own business due to illness or worse. Those documents can be reviewed and revised remotely, and do not normally require notarization. For an LLC, it is as simple as an amended and restated operating agreement naming an assistant manager who will succeed the current manager if the current manager is unable to perform his or her duties for any reason.
We are working through remote execution of new leases and agreements of sale, adding language for remote execution by each party of separate, identical counterparts, which are put together to be the lease or agreement. We are using services like Skype, Apple Face Time video and Zoom to show vacant units, or to have current tenants give video tours of occupied units to prospective tenants or buyers. We are adding language as necessary that the lease or agreement is subject to the tenant/buyer being able to walk through the unit as soon as CDC and PA Department of Health Guidance permits that to be done.
For now, my prayers are with all of you to stay safe, stay healthy, keep your real estate related business running as well as you can under the current limitations, and stay in touch with family, friends, coworkers and the ACRE community as we weather this challenge together.